Qantas bounces back with $367 million profit

By David Flynn, February 26 2015

Qantas looks to be flying high once again, with the airline chalking up a $367 million pre-tax profit over the July-December 2014 period.

The numbers represent a dramatic recovery from the same period one year ago, when Qantas reported a $252 million loss, which by August 2014 had become a $646 million sinkhole for the full 2013-2014 financial year.

Lower fuel costs contributed $33 million to the half-year haul, although Qantas says the bulk of the gains were driven by first fruits of the wide-reaching ‘transformation’ project designed to strip out $2 billion in costs by 2018.

This alone is tagged as delivering a $374 million benefit towards the bottom line.

Also helping the Red Roo turn back a rising tide of red ink are higher passengers numbers and revenue following a cease-fire in the 'capacity war' between Qantas and Virgin Australia.

Qantas Group CEO Alan Joyce welcomed the figures, saying "Our people have worked hard and made a huge contribution to bring about the change we need. They deserve great credit for this result."

"The decisive factor in our best half-year result for four years was our complete focus on the Qantas Transformation program," Joyce added.

"What sets this transformation apart is that we are reducing costs permanently while at the same time delivering Qantas’ best ever fleet, product and service."

The Qantas Frequent Flyer scheme tipped another record contribution into the kitty with $160 million pretax profit, representing a 10% growth. The program now boasts a total membership of 10.5 million.

For the latest information for business travellers and frequent flyers, follow @AusBT on Twitter.

David

David Flynn is the Editor-in-Chief of Executive Traveller and a bit of a travel tragic with a weakness for good coffee, shopping and lychee martinis.

riley

riley

Virgin Australia - Velocity Rewards

19 Mar 2014

Total posts 574

Finally Alan can Rejoyce!

CBR boy

CBR boy

12 Feb 2015

Total posts 85

A welcome return to profit. I have to say though that the increase in Qantas domestic and international airfare pricing has been noticeable over the last six+ months. Also, worth observing that there is no fleet announcement re turning 787 options into orders, which some people had expected.

David

David

24 Oct 2010

Total posts 2337

I've always expected that we would not hear any announcements on 787s or fleet generally, on new routes or even new lounges, simply as a smart PR strategy so that Qantas could ensure full focus on the positive results. There's only a limited amount of coverage Qantas can get so why pull focus away from the Good Numbers with those announcements, when they can later roll out each of those out later on their own and get a stack of publicity on each measure.

riley

riley

Virgin Australia - Velocity Rewards

19 Mar 2014

Total posts 574

Spot on David. They're using the media spotlight to their advantage. Any negative gets trumpeted for weeks and has the armchair critics (like myself) making all sorts of suggestions.

 

Let this be headline news for the next 16 hours then roll out fleet anouncements in a week or so, then new routes... The headlines will be covered in Qantas positive news.

Fonga

Fonga

12 Feb 2014

Total posts 228

Quote from Fairfax site:

'Mr Joyce said the airline was in talks with employees about conditions for  working on the 787s so that the aircraft would bring in the right returns.'

That'd be an arm wrestle with the union over staffing levels on a new plane. You'd think that would be one of the last stages in the process of ordering aircraft.

I'd say an announcement is imminent.

riley

riley

Virgin Australia - Velocity Rewards

19 Mar 2014

Total posts 574

Good observation. You wouldn't float prospective aircraft acquisitions to the union rep to hear their ideal on having a 50% staff : 50% passenger split!

I can hear next weeks headlines "and after announcing a $367m pre-tax profit last week, Qantas have unveiled the new state of the art aircraft that will soon be taking to our skies."

gippsflyer

gippsflyer

Qantas - Qantas Frequent Flyer

10 Jan 2013

Total posts 715

While I enjoyed the airfare war prices, Qantas was cutting it's own profit arteries while trying to see VA mortally wounded (and it was ultimately pointless because VA had deep pockets behind it). That would have been OK had it not caused a drop in soft product due to penny pinching in order to cope with the loss in profit). 

I'd rather Qantas have fares it can make a profit on, and see those profits invested in hard and soft product like it has done with A330 refurb (which you'll note only started to roll out after the cheapie fares were gone).

Those deep discount fares, which Australia hadn't seen before, were great but unsustainable.

brobro

brobro

02 Jan 2013

Total posts 142

I think low jet fuel prices would have a bit to do with it as well.

gippsflyer

gippsflyer

Qantas - Qantas Frequent Flyer

10 Jan 2013

Total posts 715

Helped that Qantas stopped hedging as much as it used to on fuel price. It was well placed for the rapid decline in fuel prices. Other airlines, which used a lot of fuel hedging, took a nasty bath.

CBR boy

CBR boy

12 Feb 2015

Total posts 85

Lower fuel prices only contributed a small part. Major contributing factors according to Alan Joyce were: 'transformation program', $374 million in benefits; $208 million from reduced depreciation;$162 million from increased revenue per available seat kilometre; $59 million from the removal of the carbon tax; and $33 million from lower fuel prices.

turbojezz

turbojezz

Qantas - Qantas Frequent Flyer

20 Mar 2014

Total posts 130

this is such great news! Well done qantas team!

gippsflyer

gippsflyer

Qantas - Qantas Frequent Flyer

10 Jan 2013

Total posts 715

Seems it's a red letter day all round - Qantas not only turned a profit but they also upgraded my aircraft for my upcoming SIN flight to a refurbed A330-300 (sweet!). If I get a limited edition Oroton PJ case to boot, the gods certainly are in a happy mood.

gippsflyer

gippsflyer

Qantas - Qantas Frequent Flyer

10 Jan 2013

Total posts 715

Sadly no Oroton PJ case, but it was a day flight, so fair enough.

I liked the new seat on the latest A330-300 config, a few minor things I'd like to improve but nothing major. The seat is a bit firmer than Skybed Mark II but the mattress pad took care of that. It's a major improvement on the Skybed Mark II (unless you want to romatically gaze into your partner's eyes all flight lol).

Service/soft product was a bit lower than normal (which may just be adjustment issue), but no major faults either. I'd wish the excellent service team you frequently get on SYD-CGK (and vice versa) was the Qantas benchmark though (those guys are the biz!).

Can recommend the Qantas A330-300 latest product to others.

donk1

donk1

Virgin Australia - Velocity Rewards

06 Aug 2014

Total posts 20

Mr Joyce, the GOLDEN RULE for any company  that  is  profitable  includes  dividends to shareholders!!!! Appears the profits that you proclaim to have made are only on paper. Why no dividends for nearly 10 yrs???

whipper

whipper

17 Feb 2012

Total posts 121

I don't know anyone who has ever bought an airline stock for the dividends.. 

undertheradar Banned

undertheradar Banned

28 Oct 2011

Total posts 662

hmmm...'nearly 10yrs'?? the last dividend was paid in MARCH 2009 (i'm staring at my dividend statement right now!!)...hardly 'nearly 10yrs'

personally, I'm happy to wait for a few more healthy PROFIT statements/earnings from QF, before they start giving dividends again.

undertheradar Banned

undertheradar Banned

28 Oct 2011

Total posts 662

just to clarify...recorded in MARCH 2009...paid in APRIL 2009

gippsflyer

gippsflyer

Qantas - Qantas Frequent Flyer

10 Jan 2013

Total posts 715

While dividends are great for shareholders it comes at the cost of starving companies of their own investment funds (capital they can pull down on). For some industries, where innovation needs are low, this is fine. However, airlines are constantly one-upping each other to attract business, and thus innovation needs are high. If anything, Qantas has sometimes put itself on the back-foot by giving priority to dividend payments in the past.

Remember, dividend yield chasing is predominantly an Australian craze. In markets such as the U.S. or the UK, the focus is on share price growth. Apple, etc offer little dividend yield but anyone would bought into them in the past is very happy today, and Apple benefits from constant reinvestment of its own profits back into product development to further its market penetration. There is almost no multipler effect on dividend payment for businesses - it just inflates their share price marginally.

donk1

donk1

Virgin Australia - Velocity Rewards

06 Aug 2014

Total posts 20

Most airline stocks pay dividends. Why would you contemplate investing for no returns? 

undertheradar Banned

undertheradar Banned

28 Oct 2011

Total posts 662

if someones 'standard of living'/'wealth' relies on a guaranteed income from stocks, (especially if that company is also posting losses, or just emerging from losses), then I think they seriously need to re-evaluate their priorities...dividends are a great ADDITION to my income, when they happen..but I dont expect one EVERY period to maintain my standard of living

whipper

whipper

17 Feb 2012

Total posts 121

Sorry forgot about Virgin Australia & Rex paying dividends

riley

riley

Virgin Australia - Velocity Rewards

19 Mar 2014

Total posts 574

The share price of Qantas has roughly tripled since last May. Capital growth is one reason. 

At a young age, with a modets protfolio, I look for growth that I can realise. Dividends aren't significant on my holdings.

donk1

donk1

Virgin Australia - Velocity Rewards

06 Aug 2014

Total posts 20

Takes a very keen person to want to wait for dividends! I only have blue chip stocks like Wesfarmers, CBA, Westpac etc that return regular dividends. No waiting, & notified well before the payments made.

donk1

donk1

Virgin Australia - Velocity Rewards

06 Aug 2014

Total posts 20

I don't solely rely on my dividends. I have commercial real estate, cash holdings as well. I agree that the majority of investors alone can't survive off just dividends 

Serg

Serg

QFF

12 Apr 2013

Total posts 1446

It really looks like fuel is main expense.

a19901213

a19901213

04 Aug 2014

Total posts 38

Hopefully we can soon see Alan Joyce annoucing the firm order of those mighty 787-9.

does anyone think they'll take further delivery of defered 380s? I hope they do, I love being on those spacious 380.

David

David

24 Oct 2010

Total posts 2337

I seriously doubt we'll see any more A380s; my money would be on a 'big twin' like the 777X or A350-1000.

gippsflyer

gippsflyer

Qantas - Qantas Frequent Flyer

10 Jan 2013

Total posts 715

I agree David, I think Qantas is wary of the A380 as it always requires high capacity markets. Any downturn and you end up flying a lot of empty seats.

Qantas will never go Emirates style, they'd prefer to schedule more services if necessary than fly half empty planes (much like CX). That's why Qantas is only flying the A380 on high demand routes and high seasonal services.

Merc25

Merc25

Qantas - Qantas Frequent Flyer

29 Jun 2013

Total posts 367

Great news go Qantas !!

jet_setter

jet_setter

Cathay Pacific - Asia Miles

01 Feb 2015

Total posts 113

What great news!!!!! congrats to all the team at QF for being the WORLDS BEST AIRLINE :)))))

GaryOak

GaryOak

02 Sep 2013

Total posts 12

I think its has partly to do with downgrading certin routes (eg syd-sin, syd-bkk and so on) from B747 to A330...... and also with other aspect like removal of carbon tax

gippsflyer

gippsflyer

Qantas - Qantas Frequent Flyer

10 Jan 2013

Total posts 715

Once Qantas upgrades it's A330-300s to the latest configuration, that downgrade becomes an upgrade. I certainly think the latest J cabin hard product on the A330-300 will satisfy everyone - it's lightyears ahead of the 747 (latest and last config).

watson374

watson374

Qantas - Qantas Frequent Flyer

17 Aug 2012

Total posts 2221

But there's no PE - that's a sticking point for some.

gippsflyer

gippsflyer

Qantas - Qantas Frequent Flyer

10 Jan 2013

Total posts 715

True, but being a somewhat smaller a/c running Asia-Pacific routes, something had to give. I can understand Qantas favouring PE for UK/North America/Middle East long haul routes and high season demand services, where they know people will fill any PE allocation.

If Qantas' PE wasn't class leading, there probably wouldn't be anywhere near the current levels of demand for it in the Asia-Pacific zone.

donk1

donk1

Virgin Australia - Velocity Rewards

06 Aug 2014

Total posts 20

Just adding to my previous posts. Qantas still has JUNK STATUS credit rating, & this can remain with their current  credit file   for up to 10 yrs for a corporation, so although they claim to be going back to profit, at this stage it's probably only paper profits. The JUNK STATUS remains against them even if all outstanding debts are paid. Credit & default  reporting/listing rules don't change for companies or corporations. They effectively are the same laws as applied to anyone else.  

RaptorNation158

RaptorNation158

Qantas - Qantas Frequent Flyer

21 Aug 2014

Total posts 513

What the hell happened in a year?

Yeah the cost-cutting and all that stuff helped. but $374 million, like how? I know a lot happened behind the public eye but just how, just how. How did people start magically start flying QF again. I still don't get it. But great job Qantas deliver this for 2015 and VA will be out of coal, I kinda don't hope so but still.


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